Boris Johnson, the London mayor, said the living wage was 'pure economic common sense'. Photograph: Julian Makey/Rex

More than 30,000 low-paid workers are set for a pay rise of up to £400 a year after an increase in the living wage.

The voluntary rate will increase by 20p an hour to £7.65 outside London. It is higher than the legal minimum wage, which stands at £6.31 an hour for over-21s. The London living wage rate is increasing from £8.55 an hour to £8.80.

A total of 432 employers are now signed up to the campaign, up from 78 this time last year, including Legal & General, KPMG, Barclays, Oxfam, Pearson, the National Portrait Gallery and First Transpennine Express, as well as many smaller businesses, charities and town halls.

Together they employ more than 250,000 workers and also commit to roll out the living wage in their supply chain.

The living wage is independently set each year, according to the basic cost of living in the UK. It is updated annually and employers choose to pay the rate voluntarily.

Campaigners are urging firms to pay the living wage rate to help workers cope with rising household bills such as soaring energy costs.

A new study by the charity Save the Children revealed that almost 2 million youngsters were living in households where their parents or guardians earned less than the living wage.

Rhys Moore, director of the Living Wage Foundation, said: "The living wage has become a must-have badge of honour for employers. By looking out for the living wage badge, you can now choose to support businesses that are doing the right thing. It works just like Fairtrade and will grow even faster with consumer support."

The charity Citizens UK has been leading the campaign on the living wage for more than 10 years.

The Labour party leader, Ed Miliband, who has pledged to offer tax breaks to firms paying the living wage, said: "Hundreds of businesses, charities, Labour councils across Britain and the Citizens UK living wage campaign are already showing how we can make work pay.

"A One Nation Labour government will work with employers in both the public and private sector to tackle low wages.

"Together we can help lift more people out of poverty with decent pay, raise productivity and control spending on welfare."

The London living wage rate figure was announced by the London mayor, Boris Johnson, during an event at Great Ormond Street hospital, one of the latest organisations to sign up to the campaign.

The mayor said he backed the living wage because it was "pure economic common sense", adding: "I don't think it will succeed if it is compulsory – but this is growing every year. It is the right thing for our city and our people."

Johnson said he would press the CBI to support the campaign when he addressed the business group's national conference later.